Stephen Harper vs. Justin Trudeau: income-splitting becomes an election issue

Stephen Harper vs. Justin Trudeau: income-splitting becomes an election issue

Stephen Harper vs. Justin Trudeau: income-splitting becomes an election issue In an op-ed piece published November 4 in the Toronto Star, the leader of the Liberal Party condemned the income-splitting rules as a benefit for the wealthiest of Canadians.

Worse still, it virtually eliminates the federal surplus while providing those earning $100,000 or more per year with almost half the benefits projected to flow from the proposed changes.

WP spoke with Investors Group tax specialist Aurèle Courcelles last week after the new rules were announced; his reaction was positive stating that the changes “puts more disposable income in the hands of families.” He further emphasized that there is a cap of $2,000 ensuring that the wealthy can’t run up the bill.

Trudeau clearly doesn’t see it this way making the income-splitting rules an obvious election issue come 2015. Included in the online version of the article is a survey asking readers “Do you support income-splitting for taxes?”

If the Star’s readership is any indication, initial results suggest Harper’s move to help families could backfire with the general electorate. Upwards of sixty percent of respondents feel these rules don’t favour most Canadians and are especially hurtful to low-earning single parents.

Social commentator Linda McQuaig uses an example of three different families with children each earning $100,000 in total household income to illustrate the injustice of the Family Tax Cut. One family is a single mother, the second two spouses earning $50,000 each and the third is a husband earning $100,000 with a stay-at-home wife. The first two get no benefit from the Family Tax Cut while the third benefits to the tune of $2,000, the cap under the new rules.

Everyone seems to have an opinion. Yet not everyone can be right, can they? Come election time next year it’s hard to imagine this not being at the top of anyone’s list of important issues. 

Note: WP would love to hear from financial advisors on this hot-button issue. Feel free to comment below or contact me via email
  • Chris Nicola 2014-11-06 1:12:29 PM
    The primary issue some of us have with income splitting is that it benefits a very specific subset of Canadian families, those where one person either doesn't work at all, or where there is a large difference between their incomes. Even the Conservatives can't seem to be bothered to explain why they have designed it this way, and we're all aware of their former finance minister's position on it.

    The new rules specifically exclude: childless couples, single parents and couples where both partners have similar paying jobs. On the other hand it doesn't exclude the wealthy in any way, it simply limits the benefit anyone can receive.

    I'm also not sure why it matters if the benefit is limited in size if, in the end, it is unfairly portioned out to only those Canadians who fit the Conservatives definition of a traditional family.
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  • Will Ashworth 2014-11-06 2:47:59 PM
    These are great comments.

    My wife and I are childless -- although we do have pets but I doubt they would ever count when it comes to income splitting.

    When speaking with a tax expert at Investors Group he admitted that these rules are discriminatory when it comes to couples without kids, etc.

    With less people having kids today it seems this would be an obvious group to appease.

    It's a politically charged issue for sure.
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  • John Fries 2014-11-06 6:29:41 PM
    Most programs benefit one group over another. I don't think that is a relative argument. If it is then all programs should be eliminated and we should go to a flat tax system. I will agree "rich people" should be excluded, and that could be simply done. Where do you define "rich"? Roughly 90% of Canadians earn less than $100,000 per year.
    I think it is a good benefit. My son, who has three small children, will be able to take advantage of this. His spouse cannot go back to work for the simple reason that child care expenses would eat up more than what her take home pay would be. By her staying home they do not have to tax child care facilities which are hard to access by already. Why shouldn't he be able to minimize the loss of her not working by being able to split his income? In any event, he only gets a maximum of $2000 tax credit, so it's not like a big windfall anyway. But the $2000 will help.
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